This post is a guest contribution by Rebecca Wilder*, author of the of the News N Economics blog.

Glimmers of hope are starting to emerge in the hard data. Exports in Asia are forming a more decided bottom; but since the trough is -20% to -30% off over the year, the recovery may be a long haul (or it may not). By some measures, home values in the UK and the US are showing signs of stabilization, as the annual pace of decline slows. German business sentiment continues its ascent, moving past its 1993 low! In contrast, inflation maintains its steady descent; Japan is hard hit.

Overall, the global economy is finding its footing on the path toward stabilization.

Exports in Asia: looking a little better, but still WAY down over the year!

UK and US home values: signs of hope? Yes and no.

The US measure, the Federal Housing Finance Agency (used to be OFHEO) includes only conforming mortgage homes; and therefore, it doesn’t capture the full market (there are other measures of home values, i.e., the S&P Case Shiller indices, that do not signal such a decided stabilization in home values). This is a weak market; and with foreclosures persisting and inventories high, prices are likely to fall a bit further.

According to the Ifo Institute for Economic Research, German business sentiment saw its fourth monthly gain! Here is an excerpt from the release:

The brightening was solely the result of the firms’ expectations – the pessimism of the survey participants with regard to the six-month business outlook has again weakened. Their dissatisfaction with the current business situation is just as strong as it was in May. The survey results confirm that the German economy is gradually stabilizing.

Inflation remains in (or is nearing) the red for Singapore, Hong Kong, and poor Japan.

“The survey results confirm that the German economy is gradually stabilizing.”

I don’t accept this conclusion. How can one reach this conclusion from the expectations of survey respondents of German firms? Human perceptions are notoriously unreliable. Hard data on growth of product orders would have been preferable. Even then, an increase in orders could be temporary, and does not allow the sweeping conclusion that the German economy is stabilising. Such a conclusion can only be reached when exports and GDP growth are back very close to the levels they were in 2007. Also, there are too many pivotal negative factors still worsening in the global economy to send any improvement down again. The German economy is not isolated, but on the contrary highly dependent on exports.

Then to the conclusion after the inflation chart –
“The global economy this week: looks a little brighter but still bad.” With both Japan and Singapore clearly in deflation and Hong Kong very close to deflation and heading that way, none of these economies are looking brighter at all. The graphs show a decline from inflation into or at deflation, which means they are looking a darker, not brighter. Finally, the conclusion as to the health of the global economy is extrapolated from three Asian economies representing a small fraction of the world’s economy. This conclusion does not correspond to the facts presented either.